are interest rates going to go up?

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Kutie Karen
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are interest rates going to go up?
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Lindsey18
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Very unlikely.
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Reality Check
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(Original post by Kutie Karen)
are interest rates going to go up?
Well, they certainly can't go down! Over the medium term, they will definitely trend upwards, but they're not suddenly going to go back to 'normal' for quite some time, if at all ('normal' = 5%). I'd expect a 25 or 50 basis points rise maybe once (or even twice) next year, depending on where the economy is. If the bank is right about inflation being transient, and purely COVID driven, then I think the outlook for interest rates will stay fairly low, but I think there's a good few factors which point to a highly inflationary outlook (high inflation = higher interest rates, normally).

Remember that there's a lot of people with enormous mortgages taken out during the pandemic in a very benign interest environment. It wouldn't take a huge rise in their SVR to push them into ruin, though many of these people will currently be in fixed-term deals and thus insulated from any rise. The problem for them may be that the end of their fixed-term deals will coincide with possible interest rate rises and, if they can't remortgage onto another decent deal, they could be in a sticky situation. But that's what happens when you have successive government policies designed to 'support the housing market' by essentially pushing up prices.
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Kutie Karen
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(Original post by Reality Check)
Well, they certainly can't go down! Over the medium term, they will definitely trend upwards, but they're not suddenly going to go back to 'normal' for quite some time, if at all ('normal' = 5%). I'd expect a 25 or 50 basis points rise maybe once (or even twice) next year, depending on where the economy is. If the bank is right about inflation being transient, and purely COVID driven, then I think the outlook for interest rates will stay fairly low, but I think there's a good few factors which point to a highly inflationary outlook (high inflation = higher interest rates, normally).

Remember that there's a lot of people with enormous mortgages taken out during the pandemic in a very benign interest environment. It wouldn't take a huge rise in their SVR to push them into ruin, though many of these people will currently be in fixed-term deals and thus insulated from any rise. The problem for them may be that the end of their fixed-term deals will coincide with possible interest rate rises and, if they can't remortgage onto another decent deal, they could be in a sticky situation. But that's what happens when you have successive government policies designed to 'support the housing market' by essentially pushing up prices.
Chuffed to hear they are on hold for now. .
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MonryMad
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Not any time soon....
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SlaveofAll
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(Original post by Kutie Karen)
are interest rates going to go up?
They can either go up or down, unless we entirely eschew lending or borrowing on interest for something friendlier to both parties.
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RogerOxon
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(Original post by Kutie Karen)
are interest rates going to go up?
Why do you ask?

They almost certainly will, at some point. However, interest paying accounts almost guarantee that your money will be worth less, in real terms. They are not a substitute for long-term investing.
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Jack22031994
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Not any time soon I wouldve thought. Anyway, them being so low atm means it’s quite cheap to borrow atm and as Im looking at a mortgage soon Id rather they stay low! (Yes i know they can and will go up at some point so I know the possible risks with that)
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Quady
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(Original post by Lindsey18)
Very unlikely.
Really?

What makes you think the next move will be down or that rates will never change again?
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Quady
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(Original post by Reality Check)
Well, they certainly can't go down!
Why not...?
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Reality Check
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(Original post by Quady)
Why not...?
Because the BofE has already indicated back in February that there is no intention to set a negative interest rate, and there is nothing to gain from going from 0.1% to 0.075% etc.
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Quady
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(Original post by Reality Check)
Because the BofE has already indicated back in February that there is no intention to set a negative interest rate, and there is nothing to gain from going from 0.1% to 0.075% etc.
From your own source

'the latest Monetary Policy Committee meeting showed it would ask firms to prepare for negative rates in case it was necessary for the future.'
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Reality Check
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(Original post by Quady)
From your own source

'the latest Monetary Policy Committee meeting showed it would ask firms to prepare for negative rates in case it was necessary for the future.'
(Original post by Quady)
From your own source

'the latest Monetary Policy Committee meeting showed it would ask firms to prepare for negative rates in case it was necessary for the future.'
Cmon, you can do better than cherry pick out a sentence, truncate it, decontextualise it and re-present it as 'evidence'. The full sentence you've quoted is:

'Although the central bank was clear it did not intend to set a negative bank rate at this stage, minutes from the latest Monetary Policy Committee meeting showed it would ask firms to prepare for negative rates in case it was necessary for the future.'

followed by:

'The pound rose 0.7 per cent against the dollar on the news that negative rates were not likely to be implemented imminently, alongside the bank’s more positive outlook for a post-Covid recovery. '

Note that the article was published in early Februrary 2021, so 'imminently' has already proved to be 7+ months. The point of the article is to note that the Bank has no intention to set negative interest rates; rather a desire to ensure that '...the MPC had access to negative interest rates as part of its “monetary policy toolkit”.'

Lower/negative interest rates are theoretically possible, yes. It is also theoretically possible for Angela Raynor to become PM, or Meghan Markle to become Queen. It's not very likely though. I do not believe that any sensible commentator thinks that lower or negative interest rates are at all likely, and I'm really not sure what point you're trying to make (other than to point out theoretical possibilities which don't really answer the spirit of the OP's post). If you have any credible, reliable sources to the contrary then post them up so others reading the thread can evaluate the probability or likelihood of this suggestion.
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Quady
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(Original post by Reality Check)
Cmon, you can do better than cherry pick out a sentence, truncate it, decontextualise it and re-present it as 'evidence'. The full sentence you've quoted is:

'Although the central bank was clear it did not intend to set a negative bank rate at this stage, minutes from the latest Monetary Policy Committee meeting showed it would ask firms to prepare for negative rates in case it was necessary for the future.'

followed by:

'The pound rose 0.7 per cent against the dollar on the news that negative rates were not likely to be implemented imminently, alongside the bank’s more positive outlook for a post-Covid recovery. '

Note that the article was published in early Februrary 2021, so 'imminently' has already proved to be 7+ months. The point of the article is to note that the Bank has no intention to set negative interest rates; rather a desire to ensure that '...the MPC had access to negative interest rates as part of its “monetary policy toolkit”.'

Lower/negative interest rates are theoretically possible, yes. It is also theoretically possible for Angela Raynor to become PM, or Meghan Markle to become Queen. It's not very likely though. I do not believe that any sensible commentator thinks that lower or negative interest rates are at all likely, and I'm really not sure what point you're trying to make (other than to point out theoretical possibilities which don't really answer the spirit of the OP's post). If you have any credible, reliable sources to the contrary then post them up so others reading the thread can evaluate the probability or likelihood of this suggestion.
Ok I won't cherry pick a sentence. I'll take the headline of your source:

'Banks given 6 months to prepare for negative interest rates'

That was Feb '21, its now seven months later.

What in that source makes you think up is certainly the next policy decision of the MPC?

If the odds of using it were that remote then why would the BoE ask UK banks to weaken their capital position by implementing the changes required for such a move?

Not saying the bank rate will reduce, but confused how you think its impossible they won't. Especially given your evidence is that the BoE is enforcing UK banks to prepare for such a move.
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Reality Check
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(Original post by Quady)
Ok I won't cherry pick a sentence. I'll take the headline of your source:

'Banks given 6 months to prepare for negative interest rates'

That was Feb '21, its now seven months later.

What in that source makes you think up is certainly the next policy decision of the MPC?

If the odds of using it were that remote then why would the BoE ask UK banks to weaken their capital position by implementing the changes required for such a move?

Not saying the bank rate will reduce, but confused how you think its impossible they won't. Especially given your evidence is that the BoE is enforcing UK banks to prepare for such a move.
I think we're both talking about the same thing, actually. I don't disagree with you that it's impossible that they won't - and I can't find anywhere on any of my posts where I said that. I said 'well they can't go down', which is essentially a shorthand for what we're both saying here: 99% certain they won't be going down further.

We're talking about probabilities, not economic theory or what is actually possible and what isn't. The OP wanted to know 'are interest rates going to go up?'. The answer to that, from the point of view of what the OP wants to know, is 'yes - in the medium term'. I don't see what is to be gained by pointing out that it is a theoretical possibility that rates could go down further, but it is almost certain that they won't, and the Bank has intimated such. I don't see how that answers the spirit of the OP's question, or helps understanding generally. Nearly all questions asked on TSR could have three paragraphs of possibilities as rational answers, but usually we just give the most likely or probably outcomes as options. This is what has happened here.
Last edited by Reality Check; 2 weeks ago
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Quady
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(Original post by Reality Check)
I think we're both talking about the same thing, actually. I don't disagree with you that it's impossible that they won't - and I can't find anywhere on any of my posts where I said that. I said 'well they can't go down', which is essentially a shorthand for what we're both saying here: 99% certain they won't be going down further.

We're talking about probabilities, not economic theory or what is actually possible and what isn't. The OP wanted to know 'are interest rates going to go up?'. The answer to that, from the point of view of what the OP wants to know, is 'yes - in the medium term'. I don't see what is to be gained by pointing out that it is a theoretical possibility that rates could go down further, but it is almost certain that they won't, and the Bank has intimated such. I don't see how that answers the spirit of the OP's question, or helps understanding generally. Nearly all questions asked on TSR could have three paragraphs of possibilities as rational answers, but usually we just give the most likely or probably outcomes as options. This is what has happened here.
Might have have thought in the mid to late 1990s that Japanese rates would increase in the next 20-30 years?

I'm about 40-45% sure they won't go down further?

I thought 50 basis points would be the lowest, then I thought 25 basis points.

If there were a recession in the next few months - say due to spill over from a Chinese property market slump, what would happen to monetary policy? I doubt it'd be tightened.
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Reality Check
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(Original post by Quady)
Might have have thought in the mid to late 1990s that Japanese rates would increase in the next 20-30 years?

I'm about 40-45% sure they won't go down further?

I thought 50 basis points would be the lowest, then I thought 25 basis points.

If there were a recession in the next few months - say due to spill over from a Chinese property market slump, what would happen to monetary policy? I doubt it'd be tightened.
Yes, I don't disagree with any of that. I'm more confident that rates won't go lower (90%), but we do need to keep an eye on China. Domestically, I think we're in a highly inflationary period, and I don't think that it's just 'transient due to the pandemic'. I have seen quite a few interpretations of 'transient', many of which we would normally interpret as short of entrenched, but certainly longer than 'a few months'.
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Kutie Karen
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#18
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so with the higher inflation rate, does higher interest rates not follow?
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